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BigLaw partners predict a big year for M&A in 2023

Two Herbert Smith Freehills partners share their forecast for dealmaking in Australia in 2023.

user iconJess Feyder 16 December 2022 Big Law
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Tony Damian and Andrew Rich have shared their prediction that 2023 will be another busy year for mergers and acquisitions, with activity being driven by the energy transition, investor contests and private equity. 

2023 predictions

More deals to come


2022 was a strong year for M&A; large deals and approaches were seen, like Origin Energy and OZ Minerals, along with waves of M&A in particular sectors (like tech). 

“We can expect another busy year in 2023 despite some headwinds as buyers adjust to tighter debt settings and look for high-quality assets to deploy capital,” said Mr Damian and Mr Rich.


In 2022, there were a number of high-profile demergers, including Tabcorp’s demerger of its lotteries and Keno business, along with break-up approaches for Origin Energy and Perpetual.

There were also novel spin-merge transactions, including BHP’s merger of its petroleum business into Woodside.

“Demergers and consolidations are becoming increasingly common for corporates looking to enhance growth opportunities and/or unlock value,” said the pair. “Expect to see more break-up approaches in 2023.”

Energy transition takes off

“ESG continues to drive deal flow as the transition to cleaner energy takes off,” stated Mr Damian and Mr Rich.

“Following the recent announcement of Brookfield’s and MidOcean Energy’s $18.4 billion proposal to Origin Energy, and the continued focus on energy transition and decarbonisation, we expect to see more ESG-driven transactions,” they said. 

ASIC increases proactivity

“We expect ASIC will take an increasingly proactive role in public M&A,” the pair prophesied.

“In 2022, we have already seen ASIC offer its thoughts on material adverse change conditions.

Early indications from the courts suggest support for the status quo with respect to the drafting of these conditions.”

Private equity increases

Private equity featured in a number of mega deals and proposals in 2022, explained Mr Damian and Mr Rich. Whilst some of the proposals have not translated into deals, there is an increasing appetite by private equity to compete for control of public companies.

“Even pre-bid stakes and concurrent scheme/takeover structures are now on the table for private equity,” they noted. “We don’t think that finance markets will get in the way of these vast amounts of dry powder that are ready to be deployed.”

More competition

In 2022, there were high levels of competitive processes — competition was fierce, featuring bidding wars, takeovers panel proceedings, pre-bid stakes, and concurrent scheme/takeover deal structures. This was evidenced in the cases of Warrego Energy, Virtus Health, Uniti Group and Nitro Software.

“We predict there will be even more contests in 2023 as investors compete for high-quality assets,” Mr Damian and Mr Rich mused.

Boards defend value

“Well-prepared boards will continue to defend against opportunistic bids in 2023, deploying a range of strategies, including disclosing or rejecting approaches that do not represent appropriate value as well as developing alternatives all aimed at ensuring bidders pay a full price,” they stated. 

Funding will not be an impediment

“Tighter debt settings will not be helpful to M&A, though we still expect to see leveraged deals that make sense proceed,” Mr Damian and Mr Rich stated. “On the buy side, there will be plenty of equity funding playing a prominent role in public M&A deals in 2023.”

This was evidenced this year in Australia’s largest-ever takeover — the Sydney Airport transaction, which closed this year — was entirely equity funded.

“That, along with the tabling of more scrip-for-scrip deals, means the impact of debt markets should be manageable on the overall outcomes for M&A in 2023,” they said.

Sectors to watch

Mr Damian and Mr Rich prophesied that there are three sectors that will see a boom in activity: infrastructure, technology, and energy and resources.

“Infrastructure continues to be attractive to investors looking for robust long-term returns,” they said. “Technology will also see activity as tech companies continue to attract interest and the spate of approaches late in 2022 spills into next year.

“Energy and resources, which had a very strong year, will continue to draw investors looking to participate in the energy transition.”

Scheme reform

“2022 saw certain market participants put forward the interesting but flawed reform idea of taking schemes of arrangement outside of the court and into the Takeovers Panel,” the pair explained.

“The Treasury has sensibly indicated that this proposal will not be proceeding. However, that won’t be the end of scheme reform — we think there will continue to be a constructive discussion on a streamlined approach to court documents in 2023.”

Review of 2022 predictions

Mr Damian and Mr Rich noted that the predictions they made last year were highly accurate. 

They predicted a large number of deals, with ESG driving deal flow — both of which eventuated. They predicted increasing ACCC crackdowns, which was evident throughout the year.

They also predicted a large number of auctions and consortium bids and currently predicted the sectors that boomed in 2022.